Retail Rents on the Rise as Vacancies Dwindle

Retail Rents on the Rise as Vacancies Dwindle. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

The U.S. retail real estate market is heating up, with shrinking vacancies allowing landlords to raise rents. At strip malls, vacancies fell to 10.3 percent in the second quarter and are nearly a percentage point lower than a post-recession high set in the third quarter of 2011, according to Reis Inc., a commercial data provider. At traditional malls, vacancies held at 7.9 percent in the second quarter, dropping from a high of 9.4 percent in the third quarter of 2011, according to Reis.

Retail landlords are raising rents as space becomes a premium. Rents at U.S. malls rose for the 13th consecutive quarter, rising 0.4 percent in the second quarter to $40.32 a square foot a year. Rents at U.S. strip malls posted their 11th consecutive quarter rise, increasing 0.5 percent in the quarter to $19.51 a square foot.

“This is the continuation of a slow, but decidedly upward trend in quarterly rent growth over the last few years,”  Ryan Severino, a senior economist at Reis, told The Wall Street Journal.

Builders are projected to complete 45.2 million square feet of retail space this year. In 2015, they are projected to add 71.5 million square feet of retail space in 63 markets, according to the CoStar Group, a real estate research firm. For comparison, in 2007, builders added 210 million square feet.

“We’ll see a moderate increase in the coming quarters in construction,” Suzanne Mulvee, a director of retail research at CoStar, told WSJ. “But it’s going to be a couple of years before we see construction getting back to even half the pace of what it was in 2007.”

Source: “Retail Rents on Rise as Space at a Premium,” The Wall Street Journal (July 3, 2014)

Minorities to Drive Household Growth

Minorities to Drive Household Growth. Image courtesy of David Castillo Dominici/ FreeDigitalPhotos.net

Minorities are projected to make up nearly half of first-time home buyers by 2025, and account for more than one-third of U.S. households by then, according to a study by the Joint Center for Housing Studies of Harvard University.

The Joint Center is expecting the number of households to rise overall in the next decade. It projects an increase of between 11.6 million to 13.2 million new households by 2025. Overall, 36 percent of households will be headed by minorities by 2025, according to the study, which would be up from 31.6 percent in 2013.

The age composition of households is expected to change in the next decade too, the study notes. The number of households aged 65 and older is expected to rise by 10.7 million by 2025, due to the aging baby boomer generation. Also, as members of the millennial generation enter their 30s, the study’s researchers predict they will drive household growth by 2.7 million over the next decade.

Source: “Minorities Seen Driving U.S. Household Growth: Study,” Reuters (June 26, 2014)

4 Reasons Why Buyers Should Be Happy

4 Reasons Why Buyers Should Be Happy. Image courtesy of stockimages/ FreeDigitalPhotos.net

Home shoppers may find there’s good reason to breathe a sigh of relief this summer, according to the real estate brokerage Redfin. They pointed to higher inventories, fewer bidding wars, and slowing home prices as welcoming signs for home buyers this year.

In particular, home buyers this summer are finding:

1. More options: Inventories of existing-homes are 6 percent higher than year-ago levels—currently representing a 5.6-month supply at the current sales pace, according to May housing data from the National Association of REALTORS®. The higher inventory levels of homes for-sale means that buyers have more choices this summer.
2. Less competition: As inventories rise, buyers also are facing fewer bidding wars. Bidding wars are down by double-digit margins in many markets this year, according to Redfin, which conducts an annual bidding war report. In March, 63.4 percent of offers written by Redfin agents across 19 markets faced competition from other buyers, down from a bidding war peak of 73.4 percent a year prior, according to Redfin’s report.
3. Price rises are slowing: The median existing-home price for all housing types in May was $213,400—a 5.1 percent rise above May 2013, NAR reports. Home prices rose by double-digits last year. In 2013, home prices rose 11.5 percent over 2012, according to NAR. “Home buyers are benefiting from slower price growth due to the much-needed, rising inventory levels seen since the beginning of the year,” Lawrence Yun, NAR’s chief economist.
4. Low borrowing costs: Mortgage rates are averaging about 4.1 percent, less than half the historical average of a 30-year fixed-rate mortgage, which is 8.7 percent, Redfin reports. “For a $500,000 house, this is worth more than $500 a month in mortgage payments,” savings, Redfin notes on its blog.

Source: “4 Reasons Why Homebuyers Can Breathe a Sigh of Relief,” Redfin blog (June 27, 2014)

Tech Tools REALTORS® Love the Most

Tech Tools REALTORS® Love the Most. Image courtesy of KROMKRATHOG/ FreeDigitalPhotos.net

Real estate professionals are pouring more money into mobile technologies to make their businesses more efficient and expand their reach to clients, according to the 2013-14 REALTOR® Technology Survey conducted by NAR’s Center for REALTOR® Technology.

The survey, based on more than 1,200 responses, found that brokers spent a median of $1,410 on technology for their real estate business last year, up from $1,122 in 2012. Agents spent a median of $848, up slightly from $822 in 2012.

Tools that allow for conducting business quickly and conveniently from any location were rated the highest by REALTORS®. In the survey, they cited the most valuable technologies for their business:

• Real estate software for forms and contracts (particularly Authentisign, DocuSign, ZipForms, DotLoop, and FormSimplicity);
• Mobile apps (such as Dropbox, e-Key apps, Evernote, Google Maps, Open Home Pro, Paragon, and Supra);
• Electronic tablets (iPad cited as most valuable tablet);
• Property databases (such as local MLSs, Realist public records database, realtor.com®, Trulia, and Zillow);
• CRM solutions (Top Producer® and e-Edge);
• Social media (Facebook and LinkedIn)

Smartphones and tablets — iPads, Androids, Surfaces, or Kindles — are the tools that are most likely to be on REALTORS®’ shopping lists this year, with 29 percent of those surveyed saying they plan to purchase one this year. REALTORS® say they spend a median of 44 percent of their time corresponding or doing work for their clients on a mobile device.

The most popular smartphone among REALTORS® continues to be the iPhone. Fifty-two percent of REALTORS® say they own an iPhone for their business, while 36 percent use Androids and 3 percent use Blackberry devices.

Besides technology devices, real estate professionals are increasingly using social media to generate leads and stay in contact with clients. Ninety-one percent of REALTORS® say they use social media: 70 percent say they use it to build relationships and network, while 64 percent say they use it for marketing and generating leads. Facebook is the most regularly used social network among real estate professionals (at 77 percent), followed by LinkedIn (75 percent).

“Technology has transformed the way REALTORS® do business, but in real estate, being high-tech can never come at the expense of being highly accessible,” says Mark Lesswing, NAR senior vice president and chief technology officer. “Advances in smartphones and social media have made it easier for REALTORS® to stay in touch with their customers, but maintaining a strong, personal relationship with clients is still at the heart of the business.”

The full results of the 2013-2014 REALTOR® Technology Survey can be downloaded at crt.blogs.realtor.org.

Source: National Association of REALTORS®

Government’s Flagship Foreclosure Program Extended to 2016

Government’s Flagship Foreclosure Program Extended to 2016. Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

The Obama administration announced Thursday that it will extend its Making Home Affordable Program to help home owners avoid foreclosure, as well as use Treasury funds to ramp up construction of affordable rental housing.

The Making Home Affordable Program will now be extended through December 2016. More than 1.3 million home owners have already used program to modify their mortgages.

“We need to continue to be there for home owners who are facing foreclosure, those who are struggling with increasing interest rates on their modified mortgages, and those whose homes are caught underwater,” said Treasury Secretary Jacob Lew. The average home owners have reduced their monthly payments under the program has been about $540 a month, according to the administration.

High demand in rental housing lately has caused rental costs to skyrocket. Lew said the administration also will allocate funds from the Treasury Department’s Federal Financing Bank to help housing agencies fund the construction of more affordable rental housing nationwide. The Federal Financing Bank could provide $500 million to $1 billion in annual funding for rental housing projects.

Source: “Obama Administration Expands Affordable Housing Plan,” Reuters (June 26, 2014)

Homes With Deepest Discounts

Homes With Deepest Discounts. Image courtesy of ddWitthaya Phonsawat / FreeDigitalPhotos.net

For home buyers who want to score the biggest discounts on a distressed property, they better be prepared to start the bidding. Distressed properties with the biggest price discounts are those scheduled for public foreclosure auction, and they are typically homes built between 1950 and 1990 that are now vacant, according to RealtyTrac’s May 2014 Residential & Foreclosure Sales Report. Such properties sold for an average discount of 28 percent below non-distressed sales.

RealtyTrac analyzed residential property sales transactions for the year ending in March 2014 to pinpoint the types of distressed properties that sell at the largest discounts, comparing factors like foreclosure status, occupancy status, equity, and the year the home was built. The discount was calculated by comparing the average discount (below market value) or premium (above market value) of 24 different distressed property profiles, and then comparing it to properties not in foreclosure that sold during the same time period.

While scheduled auctions offered some of the largest discounts, RealtyTrac also found that the following distressed properties also tended to carry some of the largest price discounts to buyers:

• Homes in default with positive equity: 26% discount
• Homes in default with negative equity that were built in 1950 or before and are now vacant: 26% discount
• Vacant homes with negative equity that are scheduled for foreclosure auction: 25% discount
• Homes scheduled for foreclosure auction: 25% discount
• Bank-owned properties that are vacant: 18% discount

Despite the discount on vacant bank-owned properties, RealtyTrac found that repossessed homes overall tended to sell for a 3 percent premium. Those built in 1950 or before sold at a 7 percent premium, according to the analysis.

The largest discounts on distressed properties were found to vary considerably by state. The following states had some of largest discounts on distressed properties, according to the RealtyTrac analysis:

1. New York
   Vacant properties with negative equity that are scheduled for foreclosure auction: 38% discount
2. Ohio
   Vacant properties with negative equity that were built between 1950 and 1990: 34% discount
3. Michigan
   Vacant properties in default: 34% discount
4. Florida
   Vacant properties with negative equity that were built between 1950 and 1990 and are scheduled for foreclosure auction: 29% discount
5. California
   Properties with positive equity that are scheduled for foreclosure auction: 17% discount

Source: RealtyTrac